-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, No02D5kDirqqXDPLcXigOOmLGinfYmqp21n5x1OnJLr+8+k2KvbQRTOsxejmV5Ls Zef/a9WG8YHbnYYBIRn9fg== 0000026093-95-000014.txt : 19950517 0000026093-95-000014.hdr.sgml : 19950516 ACCESSION NUMBER: 0000026093-95-000014 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940827 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CULBRO CORP CENTRAL INDEX KEY: 0000026093 STANDARD INDUSTRIAL CLASSIFICATION: TOBACCO PRODUCTS [2100] IRS NUMBER: 130762310 STATE OF INCORPORATION: NY FISCAL YEAR END: 1128 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-01210 FILM NUMBER: 95537403 BUSINESS ADDRESS: STREET 1: 387 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2125618700 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CIGAR CO INC DATE OF NAME CHANGE: 19760726 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the 13 weeks ended August 27, 1994 Commission File No. 1-1210 CULBRO CORPORATION (Exact name of registrant as specified in its charter) AMENDMENT NO. 1 This amendment to Culbro Corporation's Form 10Q for the thirteen weeks ended August 27, 1994 filed on October 11, 1994 revises the accounting for the acquisition of the Southern Divisions of NCC L.P. by the Eli Witt Company, a subsidiary of Culbro Corporation, and related transactions. The revised results reflect the elimination of an accounting change income item after tax and inclusion of a previously deferred gain on the sale of a portion of Culbro Corporation's common shares of Eli Witt. NEW YORK 13-0762310 (state or other jurisdiction of incorporation or (IRS Employer organization) Identification Number) 387 Park Avenue South, New York, New York 10016-8899 (Address of principal executive offices) (Zip code) Registrant's Telephone Number including Area Code (212) 561-8700 Former name, former address and former fiscal year, Not Applicable if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of Common Stock outstanding at October 1, 1994 - 4,308,288 CULBRO CORPORATION INDEX PART I - FINANCIAL INFORMATION PAGE Consolidated Statement of Operations and Retained Earnings - thirteen weeks ended August 27, 1994 and August 28, 1993. . . . . . . . . . . . . .3 Consolidated Statement of Operations and Retained Earnings - thirty-nine weeks ended August 27, 1994 and August 28, 1993. . . . . . . .. . . . . . .4 Consolidated Balance Sheet August 27, 1994 and November 27, 1993. . . . . . . . . . . . . .5 Consolidated Statement of Cash Flows - thirty-nine weeks ended August 27, 1994 and August 28, 1993. . . . . . . . . . . . . . . . . . . . . . .6 Notes to Consolidated Financial Statements . . . . . . . . . 7-11 Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . .12-13 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 CULBRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (dollars in thousands except per share data) (unaudited) 13 Weeks Ended -------------------------- Aug. 27, Aug. 28, 1994 1993 ----------- ---------- Net sales and other revenue $ 46,760 $357,919 Costs and expenses Cost of goods sold 29,368 318,231 Selling, general and administrative expenses 13,323 33,867 Other expense 4,000 - ---------- ------- Operating profit 69 5,821 Loss from equity investments, net 50 400 Other nonoperating income 586 - Interest expense, net 2,076 3,602 -------- -------- (Loss) income before taxes (1,471) 1,819 Income tax (benefit) provision (325) 746 ---------- -------- Income before minority interest (1,146) 1,073 Minority interest - (224) ---------- -------- Net income (1,146) 849 Accretion of Series A preferred stock of Eli Witt - (221) --------- ------- Net income applicable to common shareholders (1,146) 628 Retained earnings - beginning of period 99,532 97,221 --------- -------- Retained earnings - end of period $ 98,386 $ 97,849 ======== ======== Net (loss) income per common share $ (0.27) $ 0.14 ======== ========
The 1994 financial statements reflect the deconsolidation of Eli Witt effective at the beginning of the current year. Prior periods reflect Eli Witt as a fully consolidated subsidiary. See Note B. See Notes to Consolidated Financial Statements. CULBRO CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (dollars in thousands except per share data) (unaudited) 39 Weeks Ended ------------------------ Aug. 27, Aug. 28, 1994 1993 ----------- ---------- Net sales and other revenue $ 134,619 $1,034,176 Costs and expense Cost of goods sold 85,446 927,147 Selling, general and administrative expenses 39,430 92,873 Other expense 4,000 - ----------- ----------- Operating profit 5,743 14,156 Gain on sale of Eli Witt common stock 2,691 - Loss from equity investments, net 2,003 525 Other nonoperating income 812 - Interest expense, net 6,065 11,068 Fees on sales of accounts receivable - 476 -------- --------- Income before taxes 1,178 2,087 Income tax provision 1,137 853 --------- -------- Income before minority interest 41 1,234 Minority interest - (268) --------- -------- Income before cumulative effect of accounting change 41 966 Cumulative effect of accounting change for postretirement benefits, net of tax - (9,177) -------- --------- Net income (loss) 41 (8,211) Accretion of Series A preferred stock of Eli Witt - (442) -------- --------- Net income (loss) applicable to common shareholders 41 (8,653) Retained earnings - beginning of period 98,345 106,502 --------- ------------ Retained earnings - end of period $ 98,386 $ 97,849 ========= ========== Income per common share before cumulative effect of accounting change $ 0.01 $ 0.12 Cumulative effect of accounting change per common share - (2.13) -------- ----------- Net income (loss) per common share $ 0.01 $ (2.01) ========== ===========
The 1994 financial statements reflect the deconsolidation of Eli Witt effective at the beginning of the current year. Prior periods reflect Eli Witt as a fully consolidated subsidiary. See Note B. See Notes to Consolidated Financial Statements. CULBRO CORPORATION CONSOLIDATED BALANCE SHEET (dollars in thousands except per share data) Aug. 27, Nov. 27, ASSETS 1994 1993 ------------ ---------- Current Assets (unaudited) Cash and cash equivalents $ 668 $ 8,715 Receivables, less allowance of $1,208 (1993 - $2,364) 23,736 75,917 Inventories 69,873 128,216 Other current assets 13,694 5,931 ------- -------- Total current assets 107,971 218,779 Property and equipment, net 76,803 114,898 Real estate held for sale or lease, net 31,355 35,338 Investment in Series B preferred stock of The Eli Witt Company 12,141 - Investment in real estate joint ventures 8,075 8,275 Other, including investment in Centaur Communications of $14,270 (1993 - $14,195) 20,414 24,923 Intangible assets 19,160 21,446 -------- -------- Total assets $275,919 $423,659 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued liabilities $ 20,180 $ 72,870 Long-term debt due within one year 4,285 14,519 Income taxes 1,406 264 --------- -------- Total current liabilities 25,871 87,653 Long-term debt 106,633 175,405 Deferred income taxes 5,203 5,479 Accrued retirement benefits 14,917 19,477 Other noncurrent liabilities and deferred credits 12,369 14,758 --------- --------- Total liabilities 164,993 302,772 --------- --------- Minority interest in subsidiary - 10,005 ---------- ---------- Shareholders' Equity Common stock, par value $1 Authorized - 10,000,000 shares Issued - 4,549,190 shares 4,549 4,549 Capital in excess of par value 13,296 13,296 Retained earnings 98,386 98,345 ---------- --------- 116,231 116,190 Less - Common stock in Treasury, at cost, 240,902 shares (1993 - 241,128) (5,305) (5,308) ----------- ---------- Total shareholders' equity 110,926 110,882 ----------- ---------- Total liabilities, minority interest and shareholders' equity $275,919 $423,659 ========== ==========
The 1994 financial statements reflect the deconsolidation of Eli Witt effective at the beginning of the current year. Prior periods reflect Eli Witt as a fully consolidated subsidiary. See Note B. See Notes to Consolidated Financial Statements. CULBRO CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (dollars in thousands) (unaudited) 39 Weeks Ended ------------------------------ Aug. 27, Aug. 28, 1994 1993 ----------- ---------- Operating activities: - --------------------- Net income (loss) $ 41 $ (8,211) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Cumulative effect of accounting change, net of tax - 9,177 Depreciation and amortization 5,409 9,141 Gain on sale of Eli Witt common stock (2,691) - Loss from equity investments, net 2,003 525 Discount and interest on subordinated note 812 - Other nonoperating income (812) - Provision for bad debts 308 1,207 Changes in assets and liabilities net of effects from the deconsolidation of Eli Witt in 1994 and the acquisition of Certified Grocers in 1993: Decrease in real estate held for sale or lease, net 3,983 616 Decrease in inventories 414 71,029 Decrease in accounts receivable 1,041 6,325 Decrease in sales of accounts receivable - (26,000) Decrease in accounts payable and accrued liabilities (2,401) (6,259) Decrease in deferred taxes (2,276) (751) Other, net 280 (938) ----------- --------- Net cash provided by operating activities 6,111 55,861 ----------- -------- Investing activities: - --------------------- Additions to property and equipment (2,961) (7,322) Proceeds from the sale of Eli Witt common stock 672 - Proceeds from Take-out Agreement with Moll PlastiCrafters - 4,953 Acquisition of Certified Grocers, net cash acquired - (2,004) --------- --------- Net cash used in investing activities (2,289) (4,373) --------- --------- Financing activities: - --------------------- Payments of debt (1993 principally reflects refinancing of debt assumed from acquisition of Certified Grocers) (20,357) (70,751) Increase in debt (1993 principally reflects debt assumed in acquisition of Certified Grocers) 16,328 23,944 --------- --------- Net cash (used in) financing activities (4,029) (46,807) --------- --------- Net (decrease) increase in cash and cash equivalents (207) 4,681 Cash and cash equivalents at beginning of period (excluding Eli Witt cash of $7,840 at the beginning of 1994 not available to the Corporation) 875 1,898 --------- --------- Cash and cash equivalents at end of period $ 668 $ 6,579 ========= =========
The 1994 financial statements reflect the deconsolidation of Eli Witt effective at the beginning of the current year. Prior periods reflect Eli Witt as a fully consolidated subsidiary. See Note B. See Notes to Consolidated Financial Statements. CULBRO CORPORATION Notes to Consolidated Financial Statements (dollars in thousands) (unaudited) A. The unaudited financial statements included in this report have been prepared in conformity with the standards of accounting measurement set forth in Accounting Principles Board Opinion No. 28 and any amendments thereto adopted by the Financial Accounting Standards Board. Also, the financial statements have been prepared in accordance with the accounting policies stated in the Corporation's 1993 Annual Report to Shareholders included in Form 10K, except for a change in the basis of consolidation (as discussed in Note B below) and should be read in conjunction with the Notes to Consolidated Financial Statements appearing in that report. All adjustments which are, in the opinion of management, necessary for a fair presentation of results for the interim periods have been reflected. The results of operations for the thirteen and thirty-nine weeks ended August 27, 1994 are not necessarily indicative of the results to be expected for the full year. B. On April 25, 1994, Eli Witt acquired the net assets of the six Southern distribution facilities of NCC L.P. (see Note C) in exchange for 595,000 newly issued common shares of Eli Witt. The Corporation accounted for this transaction as a like kind exchange and therefore did not recognize any gain or loss on this transaction. As a result of the additional shares of common stock issued by Eli Witt and the concurrent sale by the Corporation of 400,000 shares of its Eli Witt common stock holdings (see Note C), the Corporation's ownership of Eli Witt's outstanding common stock was reduced from 85% to 50.1%. In connection with these transactions the Corporation entered into a Shareholders Agreement with MS Distribution, Inc. ("MSD"), a former limited partner in the NCC L.P. partnership. MSD now owns approximately 38% of the outstanding common stock of Eli Witt. This Agreement contains certain governance provisions which require the prior approval of MSD for all major transactions by Eli Witt, including (but not limited to), incurrence of debt, acquisitions, material contracts, the sale of assets, issuance and repurchase of stock, changes in Eli Witt's charter and by-laws, and capital expenditures. Due to the shareholder rights granted to MSD, the Corporation no longer has unilateral control over Eli Witt. Therefore, the Corporation deconsolidated Eli Witt as of April 25, 1994 and is accounting for its remaining investment in Eli Witt under the equity method. The 1994 financial statements reflect the application of the equity method of accounting retroactive to the beginning of the year. The financial statements of the prior year continue to reflect Eli Witt as a fully consolidated subsidiary. The following unaudited condensed balance sheet, statements of operations and statement of cash flows of the Corporation, presented for comparative purposes, reflect Eli Witt under the equity method on a pro forma basis in 1993. Condensed Balance Sheet of Culbro Corporation Nov. 27, Aug. 27, 1993 1994 (pro forma) ----------- ------------- Total current assets $ 107,971 $ 100,293 Property and equipment, net 76,803 78,770 All other noncurrent assets 91,145 102,833 ----------- ----------- Total assets $ 275,919 $ 281,896 ========== =========== Total current liabilities $ 25,871 $ 32,592 Long term debt 106,633 104,914 All other noncurrent liabilities 32,489 33,508 --------- ---------- Total liabilities 164,993 171,014 Shareholders' equity 110,926 110,882 Total liabilities and shareholders' equity $ 275,919 $ 281,896 ========== ==========
Condensed Statement of Operations of Culbro Corporation 13 Weeks Ended --------------------------- Aug. 28, Aug. 27, 1993 1994 (pro forma) --------- ------------ Operating activities: - -------------------- Net sales and other revenue $ 46,760 $ 41,291 Operating profit (including other expense of $4,000 in 1994) 69 2,179 (Loss) income from equity investments (50) 245 Net (loss) income (1,146) 628 39 Weeks Ended ------------------------ Aug. 28, Aug. 27, 1993 1994 (pro forma) --------- ------------- Net sales and other revenue $ 134,619 $119,816 Operating profit (including other expense of $4,000 in 1994) 5,743 4,193 Gain on sale of Eli Witt common stock 2,691 - (Loss) income from equity investments (2,003) 1,672 Income before cumulative effect of accounting change 41 524 Condensed Statement of Cash Flows of Culbro Corporation 39 Weeks Ended ------------------------- Aug. 28, Aug. 27, 1993 1994 (pro forma) ---------- ----------- Operating activities: - -------------------- Net cash provided by (used in) operating activities $ 6,111 $ (3,755) -------- --------- Investing activities: - ---------------------- Additions to property and equipment (2,961) (3,130) Proceeds from sale of Eli Witt common stock 672 - Cash dividend from Eli Witt - 41,529 Net repayment of Eli Witt intercompany debt - 46,129 Issuance of a mortgage on an Eli Witt facility - (10,000) Proceeds from Take-Out Agreement - 4,953 ------- -------- Net cash (used in) provided by investing activities (2,289) 79,481 --------- --------- Financing activities: - -------------------- Payments of long-term debt (20,357) (75,991) Increases in long-term debt 16,328 - Net cash used in financing activities (4,029) (75,991) --------- -------- Net decrease in cash and cash equivalents $ (207) $ (265) ========= =========
C. At the time of the deconsolidation and at August 27, 1994, Eli Witt was in a common deficit position, and as such, the Corporation has a negative basis in its common equity investment in Eli Witt. The negative basis of approximately $6.5 million at August 27, 1994 is reflected as a deferred credit on the Corporation's balance sheet. Accordingly, the Corporation recognized the results of Eli Witt through the April 25, 1994 deconsolidation date and will not recognize any future profit or loss of Eli Witt until its common deficit is recouped. At August 27, 1994, the $15 million face value mandatorily redeemable Series B preferred stock of Eli Witt held by the Corporation is included on the consolidated balance sheet at approximately $12.1 million. This amount reflects the fair value of the related subordinated note for which it is exchangeable in August 1998. The carrying value of the Series B preferred stock is being increased by accretion to its $15 million face value, plus 10% cumulative dividends. The total amount of accretion and dividends is equal to the amortization of the original issue discount plus accrued interest on the subordinated note. Other nonoperating income for the thirteen and thirty-nine weeks ended August 27, 1994 in the consolidated statements of operations reflects accretion and accrued dividends of $586 and $812, respectively, which equal the amounts of discount amortization and interest on the subordinated note included in the Corporation's consolidated interest expense for the respective periods. Eli Witt's unaudited summarized financial information is as follows: Summarized Statement of Operations of Eli Witt 39 Weeks Ended ------------------------------- Aug. 27, Aug. 28, 1994 1993 --------- --------- Net sales and other revenues $1,072,063 $ 914,360 Operating (loss) profit (4,575) 9,963 Net (loss) income (6,193) 2,907 Dividends/accretion related to preferred stock (1,824) (1,217) Net (loss) income available to common shareholders (8,077) 1,690 Summarized Balance Sheet of Eli Witt Aug. 27, Nov. 27, 1994 1993 ----------- --------- Trade receivables, net $ 73,932 $ 50,832 Inventories 53,766 57,929 Property and equipment, net 42,261 36,128 All other assets 20,820 20,036 ---------- --------- Total assets $190,779 $164,925 ========= ========= Accounts payable and accrued expenses $ 64,779 $ 49,666 Total debt 103,016 85,263 All other liabilities 10,084 12,067 ---------- --------- Total liabilities 177,879 146,996 -------- --------- Mandatorily redeemable Series B preferred stock 17,275 16,150 -------- -------- Shareholders' (deficit) equity: Series A preferred stock 9,442 10,005 Series C preferred stock 1,321 - Common stock and accumulated deficit (15,138) (8,226) --------- -------- Total shareholders' (deficit) equity (4,375) 1,779 --------- -------- Total liabilities, preferred stock and shareholders' (deficit) equity $190,779 $164,925 ========= ========
On April 25th, 1994, Eli Witt acquired the net assets of the six Southern distribution facilities of NCC L.P., ("NCC"), a limited partnership engaged in the wholesale distribution business. The six facilities, designated as NCC South, comprised a portion of the overall distribution business conducted by NCC through nine warehouses in total. Prior to this acquisition, the Corporation owned 85% of the outstanding common stock of Eli Witt and the former shareholders of Certified Grocers of Florida, Inc. ("Certified Grocers") held 15%, which they received in connection with Eli Witt's acquisition of Certified Grocers in 1993. In connection with its acquisition of NCC South, Eli Witt issued to NCC 595,000 shares of common stock, representing approximately 23% of its outstanding common stock after the acquisition. In a transaction executed simultaneously with Eli Witt's acquisition of NCC South, the Corporation sold 400,000 shares of its Eli Witt common stock to MSD, a former limited partner of NCC and an affiliate of the Morgan Stanley Leveraged Equity Fund II L.P., and issued a $15 million subordinated note to MSD. In return, the Corporation received proceeds of $12 million and the right to exchange in 1998, at the Corporation's option, the subordinated note for the $15 million face value Eli Witt Series B preferred stock held by the Corporation. The $12 million proceeds received from MSD was allocated to the subordinated note ($11,328) and to the Eli Witt common stock sold ($672) based on their fair values as of April 25, 1994. A pretax gain of $2,691 was recognized on the 400,000 shares sold to MSD comprising the proceeds of $672 and the Corporation's negative basis of $2,019 in the shares sold. As a result of the transactions described above, MSD owns shares totaling approximately 38% of the outstanding common stock of Eli Witt. The Corporation retained a 50.1% ownership in the outstanding common stock of Eli Witt, and the former shareholders of Certified Grocers now hold approximately 12% of the outstanding common stock of Eli Witt. D. As described in Note C, the Corporation issued a $15 million, 10% subordinated note due August 1998 and sold 400,000 of its Eli Witt shares for proceeds of $12 million in connection with Eli Witt's acquisition of NCC South. No interest payments are required on the note until maturity, at which time the principal and all accrued interest may be exchanged, at the Corporation's option, for the Series B preferred stock of Eli Witt held by the Corporation. Interest expense in the thirteen and thirty-nine weeks ended August 27, 1994 includes $212 and $294 respectively, for amortization of the original issue discount on the subordinated note. On January 27th, 1994 the Corporation obtained a $5 million mortgage on certain equipment. The proceeds were used to reduce the amount outstanding under the Corporation's Credit Agreement. The mortgage bears interest at 7.25% per annum and has a term of ten years, with a balloon payment of $1.2 million due at termination. E. Supplemental Financial Statement Information Inventories ----------- Inventories consist of: Aug. 27, Nov. 27, 1994 1993 ---------- --------- Raw materials and supplies $32,374 $ 34,232 Work-in-process 16,775 15,213 Finished goods 20,724 78,771 ----------- --------- $69,873 $128,216 =========== ========== Property and equipment ---------------------- Property and equipment consist of: Aug. 27, Nov. 27, 1994 1993 --------- --------- Land $11,303 $ 13,453 Buildings 62,478 84,340 Machinery and equipment 57,964 81,871 Accumulated Depreciation (54,942) (64,766) ---------- ----------- $ 76,803 $114,898 ========= ========= Supplemental Cash Flow Information ----------------------------------- Cash paid during the period for: 39 Weeks Ended ---------------------------- Aug. 27, Aug. 28, 1994 1993 ---------- --------- Interest, net of amounts capitalized $ 6,107 $ 10,719 ========== ========== Income taxes, net $ 2,356 $ 1,504 ========== ==========
F. The net income (loss) per common share for the thirteen and thirty-nine weeks ended August 27, 1994 is based on the weighted average number of shares of common stock outstanding during the respective periods. The Corporation's outstanding stock options were not considered because they are anti-dilutive. The weighted average number of shares of common stock and common stock equivalents was 4,308,228 and 4,308,261 for the thirteen and thirty-nine weeks ended August 27, 1994, respectively. The weighted average common shares outstanding for the thirteen and thirty-nine weeks ended August 28, 1993 was 4,308,062. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources - ------------------------------- As discussed in Note B, the Corporation's subsidiary in the wholesale distribution business, The Eli Witt Company ("Eli Witt"), was deconsolidated from the Corporation's financial statements in the current year's second quarter. Last year's statements have not been restated. The deconsolidation did not have an effect on the Corporation's cash flow because, as previously reported, the cash flows of Eli Witt have not been available to the Corporation since Eli Witt was financed separately from the Corporation and its other subsidiaries in February, 1993. Comparisons of changes in cash flow with the prior year are based on the pro forma 1993 cash flow information contained in Note B. Net cash provided by operating activities in the current year's nine month period as compared to net cash used in operating activities in the comparable period of the prior year principally reflects the effect of the termination of the accounts receivable sales agreement last year ($6.5 million) and the Corporation's higher operating profit, excluding the effect of the $4.0 million pretax charge, which primarily reflected the writeoff of previously expended costs in the Corporation's Connecticut real estate business. The termination of the accounts receivable sales agreement was related to the separate financing of Eli Witt that became effective in the 1993 first quarter. Cash used in 1994 investing activities reflects capital expenditures, primarily in the Corporation's industrial products business, which were slightly lower than the prior year's nine month period, partially offset by the proceeds from the sale of Eli Witt common stock. The prior year's investing activities reflected cash generated and used in several one time transactions. The Corporation received proceeds from the intercompany dividend and repayment of intercompany debt from Eli Witt in connection with Eli Witt becoming separately financed in 1993, and the Corporation entered into a mortgage with Eli Witt on their Ocala, Florida distribution facility. The net proceeds from these transactions were used by the Corporation to repay its debt last year. Cash used in financing activities declined in the current period because the prior year reflected higher payments of long-term debt principally from cash generated by the one-time transactions described above. Cash used in financing activities in the current period reflects payments of long-term debt, including a $3 million prepayment and a $7.6 million scheduled payment of the 9.7% Senior Notes and a reduction of amounts outstanding under the Credit Agreement, principally from the proceeds of $11.3 million from the subordinated note issued to MS Distribution, Inc. ("MSD"), a partner of NCC L.P., and proceeds of $5 million from an equipment mortgage obtained by the Corporation. The subordinated note does not require interest or principal payments until maturity, at which time it is exchangeable at the Corporation's option, for the Series B preferred stock of Eli Witt currently held by the Corporation. The payment terms and exchangeability feature were structured to maximize the Corporation's after-tax cash flow from this transaction. Subsequent to the end of the third quarter, Eli Witt obtained an $8 million mortgage from a financial institution on their Ocala distribution facility, on which the Corporation held a $10 million mortgage. Eli Witt used all of the mortgage proceeds to reduce its mortgage with the Corporation, which repaid outstanding debt under its Credit Agreement. The Corporation retained a $2 million second mortgage on the Ocala facility. Management believes that the Corporation's cash flow from operations may need to be supplemented by proceeds generated from other transactions to meet operating and capital requirements and scheduled debt repayments. Over the long-term, management will seek to maintain a level of indebtedness which is commensurate with the Corporation's earnings and cash flow. Results of Operations - --------------------- As a result of the deconsolidation of Eli Witt, and accounting for this subsidiary under the equity method, the current year's financial statements have been restated to reflect the deconsolidation as of the beginning of the fiscal year. Prior year's statements were not restated. The comparisons reflected in the following discussion pertain to the pro forma condensed statements of operations contained in Note B, which presents Eli Witt under the equity method for 1993. The Corporation's third quarter and nine month results, declined from the comparative periods of last year due to other expense of $4.0 million recorded in the current year's third quarter and lower results from the Corporation's equity investments. The other expense includes a $3.6 million charge in the Corporation's Connecticut real estate business for the writeoff of previously expended costs on projects which will not be developed as they are no longer viable, and a $400,000 charge to close a facility in the industrial products business. These items were partially offset by higher operating profit in the cigar business and in the industrial products business, excluding the shutdown charge. The nine month period also includes a pretax gain of approximately $2.7 million on the Corporation's sale of a portion of its Eli Witt common stock holdings. Operating profit at General Cigar Co., Inc. ("General Cigar") increased due principally to higher volume on premium cigar sales and price increases on all cigar categories. Excluding the restructuring charge, operating profit at CMS Gilbreth Packaging Systems, Inc. ("CMS Gilbreth") increased due principally to higher sales volume on both packaging machinery and packaging materials and improved margins on sales. The improved margins reflected benefits realized from manufacturing efficiencies and better absorption of fixed costs due to the higher volume. CMS Gilbreth's largest customer of packaging materials, comprising approximately 20% of CMS Gilbreth's total annual revenue, has informed management that they will change the type of label to be applied to their product and therefore will not continue to purchase labels from CMS Gilbreth. The impact of this will not affect the current year's results because the change by the customer is not expected to take place until the 1995 first quarter, at the earliest. In the Corporation's Connecticut real estate business, Culbro Land Resources, Inc. ("CLR"), excluding the $3.6 million charge described above, operating results increased in the third quarter and nine months as compared to corresponding periods of the prior year. This increase was due to a significant land sale completed in the current year's third quarter, whereby CLR received proceeds of approximately $1,000,000 and profit of approximately $900,000 on the sale of 78 acres of undeveloped land. Results in the Corporation's nursery products business, Imperial Nurseries, Inc. ("Imperial") were substantially unchanged in the third quarter and nine month period. Imperial's business continues to be negatively affected by competitive pricing pressures in the industry and higher costs. The Corporation's lower results from equity investments was due to Eli Witt, as the cigarette inventory price appreciation and manufacturers' purchase incentive programs that benefitted Eli Witt in the prior year did not occur in the current year. Price changes instituted by cigarette manufacturers in the third quarter last year also negatively affected gross profit by effectively reducing margins on cigarettes, which comprise a substantial portion of Eli Witt's sales. The Corporation did not recognize its share of Eli Witt's results subsequent to the deconsolidation (April 25, 1994) because of Eli Witt's common deficit position and will not recognize any future results of Eli Witt until their common deficit is recouped. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CULBRO CORPORATION (Registrant) Date: May 11, 1995 (Jay M. Green) Jay M. Green Executive Vice President - Chief Financial Officer and Treasurer Date: May 11, 1995 (Joseph Aird) Joseph Aird Vice President - Controller EX-27 2
5 9-MOS DEC-03-1994 AUG-27-1994 668 0 24,944 (1,208) 69,873 107,971 131,745 (54,942) 275,919 25,871 0 4,549 0 0 106,377 275,919 134,619 134,619 85,446 124,876 4,000 308 6,065 1,178 1,137 41 0 0 0 41 0.01 0.01
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